If there was ever an argument that you should rely on independent newsletters for guidance about financial markets, such as The Diary of a Mad Hedge Fund Trader, and not traditional brokerage houses, take a look at the chart below from JP Morgan.
It shows that despite all of the reforms passed after the dotcom crash, less than 3% of broker reports come with “sell” or “hold/sell” ratings.
If an investment bank’s analyst dislikes a stock, they will simply drop coverage or lose the file behind the radiator, rather than lose potentially lucrative business or risk potential lawsuits.
If individual investors are going to have a prayer of keeping their heads above water in the “new normal,” it will only be through studying truly unbiased sources and drawing their own conclusions.
Despite many pretenders, there are no real “gurus” out there, no matter how hard you look.
If this reality is too hard to face, get used to the 0.01% you are earning in your money market fund, or the 2.51% you get with ten-year Treasury bonds.
These ultra-low short rates are going to be around for a while.
https://www.madhedgefundtrader.com/wp-content/uploads/2012/04/Guru-1.jpg320286The Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngThe Mad Hedge Fund Trader2024-10-23 09:02:442024-10-23 16:32:32There Are No Gurus
Last weekend, I had dinner with one of the oldest and best-performing technology managers in Silicon Valley. We met at a small out-of-the-way restaurant in Oakland near Jack London Square so no one would recognize us. It was blessed with a very wide sidewalk out front and plenty of patio tables.
The service was poor and the food indifferent, as are most dining experiences these days. I ordered via a QR code menu and paid with a touchless Square swipe.
I wanted to glean from my friend the names of the best tech stocks to own for the long term right now, the kind you can pick up and forget about for a decade or more, a “lose behind the radiator” portfolio.
To get this information, I had to promise the utmost confidentiality. If I mentioned his name, you would say “Oh my gosh!”
Amazon (AMZN) is now his largest holding, the current leader in cloud computing. Only 5% of the world’s workload is on the cloud presently so we are still in the early innings of a hyper-growth phase there.
By the time you price in all the transportation, labor, and warehousing costs, Amazon breaks even with its online retail business at best. The mistake people make is only focusing on these lowest-of-margin businesses.
It’s everything else that’s so interesting. While its profitability is quite low compared to the other Magnificent Seven stocks, Amazon has the best growth outlook. For a start, third-party products hosted on the Amazon site, most of what Amazon sells, offer hefty 30% margins.
Amazon Web Services (AWS) has grown from a money loser to a huge earner in just four years. It’s a productivity improvement machine for the world’s cloud infrastructure where they pass all cost increases on to the customer, who once in, buys more services.
Apple (AAPL) is his second holding. The company is in transition now justifying a massive increase in earnings multiples, from 9X to 34X over the last several years. The iPhone has become an indispensable device for people around the world, and it is the services sold through the phone that are key.
The iPhone is really not a communications device but a selling device, be it for apps, storage, music, or third-party services. The cream on top is that Apple is at the very beginning of an enormous replacement cycle for its installed base of over one billion phones. Moving from up-front sales to a lifetime subscription model will also give it a he boost.
Half of these are more than four years old and positively geriatric in the tech world. More than half of these are outside the US. 5G will add a turbocharger.
Netflix (NFLX) is another favorite. The world is moving to “over the top” content delivery and Netflix is already spending twice as much on content as any other company in this area. This is why the company won an amazing 21 Emmys this year. This will become a much more profitable company as it grows its subscriber base and amortizes its content costs. Their cash flow is growing by leaps and bounds, which they can use to buy back stock or pay a dividend.
Generally speaking, there is no doubt that the pandemic has pulled forward some future technology demand with the stay-at-home trend. But these companies have delivered normal growth in a hard world. Tech growth will accelerate in 2021 and 2022.
5G will enable better Internet coverage for everyone and will increase the competitiveness of the telecom companies. Factory automation will be another big area for 5G, as it is reliable and secure, and can be integrated with artificial intelligence.
Transportation will benefit greatly. Connected self-driving cars will be a big deal, improving safety and the quality of life.
My friend is not as worried about government-threatened breakups as regulation. There will be more restraints on what these companies can do going forward. Europe, which has no big tech companies if its own, views big American tech companies simply as a source of revenues through fines. Driving companies out of business through cutthroat competition is simply not something Europeans believe in.
Google (GOOG) is probably more subject to antitrust proceedings both in Europe and the US. The founders have both retired to pursue philanthropic activities, so you no longer have the old passion (“don’t be evil”).
Both Google and Meta (META) control 70% of the advertising market between them, which is inherently a slow-growing market, expanding at 5% a year at best. (META)’s growth has slowed dramatically, while it has reversed at (GOOG).
He is a big fan of (AMD), one of his biggest positions, which is undervalued relative to the other chip companies. They out-executed Intel (INTC) over the last five years and should pass it over the next five years.
He has raised value tech stocks from 15% to 30% of his portfolio. Apple used to be one of these. Semiconductor companies today also fall into this category. Samsung with 40% margins in its memory business is a good example. Selling for 10X earnings it is ridiculously cheap. It is just a matter of time before semiconductors get rerated too.
He was an early owner of Tesla (TSLA) back in the nail-biting days when it was constantly running out of cash. Now they have the opposite problem, using their easy access to cash through new share issues as a weapon to fight off the other EV startups. Tesla is doing to Detroit what Apple did to the cell phone companies, redefining the car.
Its stock is overvalued now but will become much more profitable than people realize. They also are starting to extract service revenues from their cars, like Apple has. Tesla will grow revenues by 30%-50% a year for the next two or three years. They should sell several million of the new small SUV Model Y. Most other companies bringing EVs will fall on their faces.
EVs are a big factor in climate change, even in China, the world’s biggest polluter. In Europe, they are legislating gasoline cars out of existence. If you can make money building cars in Fremont, CA, you can make a fortune building them in China.
Tech valuations are high, there is no doubt about it. But interest rates are much lower by comparison. The Fed is forcing people to buy stocks, enabling these companies to evolve even faster.
When rates rise in a year or so tech stocks may have to come down. They have a lot more things going for them than against them. The customers keep coming back for more.
Needless to say, the above stocks should make up your shortlist for LEAPS to buy at the coming market bottom.
https://www.madhedgefundtrader.com/wp-content/uploads/2019/12/john-oakland-fire-dept-e1575991479435.png335500Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2024-09-26 09:02:312024-09-26 13:14:07An Insider’s Guide to the Next Decade of Tech Investment
Lately, I have spent my free time strolling the worst slums of Oakland, CA.
No, I’m not trying to score a drug deal, hook up with some ladies of ill repute, or get myself killed.
I was looking for the best-performing investment for the next 30 years.
Yup, I was looking for new homes to buy.
As most of you know, I try to call all of my readers at least once a year and address their individual concerns.
Not only do I pick up some great information about regions, industries, businesses, and companies, but I also learn how to rapidly evolve the Diary of a Mad Hedge Fund Trader service to best suit my voracious, profit-seeking readers.
So when a gentleman asked me the other day to reveal to him the top-performing asset of the next 30 years, I didn’t hesitate: your home equity.
He was shocked.
I then went into the economics of the Oakland trade with him.
West Oakland was built as a working-class neighborhood in the late 1890s. Many structures still possess their original Victorian designs and fittings.
Today, it is a 5-minute BART ride under the Bay to the San Francisco financial district.
A one-three bedroom two bath home I saw was purchased a year ago for $450,000, with a $50,000 down payment and a 6.5% loan on the balance.
The investor quickly poured $50,000 into the property, with new paint, heating, hot water, windows, a kitchen, bathrooms, and flooring.
A year later, he listed it for sale at $650,00, and the agent said there was a bidding war that would probably take the final price up to $700,000.
Excuse me, gentlemen, but that is a 400% return on a 50,000 investment in 12 months.
As Oakland rapidly gentrifies, the next buyer will probably see a doubling in the value of this home in the next five years.
Try doing that in the stock market.
Needless to say, housing stocks like Lennar Homes (LEN), DH Horton (DHI), and Pulte Homes (PHM) need to be at the core of any long-term stock portfolio.
I then proceeded to list off to my amazed subscriber the many reasons why residential housing is just entering a Golden Age that will drive prices up tenfold, if not 100-fold, in the decades to come. After all, over the last 60 years, the value of my Dad’s home in LA went up 100-fold and the equity 1,000-fold.
1) Demographics. This started out as the hard decade for housing when 80 million downsizing baby boomers unloaded their homes for greener pastures at retirement condos and assisted living facilities.
The 65 million Gen Xers who followed were not only far fewer in number, they earned much less, thanks to globalization and hyper-accelerating technology.
All of this conspired to bring us a real estate crash that bottomed out in 2011.
During the 2020s, the demographics math reverses.
That’s when 85 million millennials start chasing the homes owned by 65 million Gen Xers.
And as they age, this group will be earning a lot more disposable income, thanks to a labor shortage.
2) Population Growth
If you think it's crowded now, you haven’t seen anything yet.
Over the next 30 years, the US population is expected to soar from 335 million today to 450 million. California alone will rocket from 38 million to 50 million.
That means housing for 115 million new Americans will have to come from somewhere. It sets up a classic supply/demand squeeze.
That’s why megaprojects like the San Francisco to Los Angeles bullet train, which may seem wasteful and insane today, might be totally viable by the time they are finished.
3) They’re Not Building Them Anymore
Or at least not as much as they used to.
Total housing starts for 2023 were 1.55 million, a 3% decline from the 1.60 million total from 2022. Single-family starts in 2023 totaled 1.01 million, down 10.6% from the previous year. That means they are producing a half of peak levels.
The home building industry has to more than triple production just to meet current demand.
Builders blame regulation, zooming, the availability of buildable land, lack of financing, and labor shortages.
The reality is that the companies that survived the 2008 crash are a much more conservative bunch than they used to be. They are looking for profits, not market share. They are targeting a specific return on capital for their business, probably 20% a year pretax.
It is no accident that new homebuilders like Lennar (LEN), Pulte Homes (PHM), and (DHI) make a fortune when building into rising prices and restricted supply. Their share prices have been on an absolute tear and are at all-time highs. And that is with a 6.1% mortgage rate.
This strategy is creating a structural shortage of 10 million new homes in this decade alone.
4) The Rear View Mirror
The Case Shiller CoreLogic National Home Price Index (see below) has started to rise again after a year of declines. Net out of the many tax breaks that come with ownership, the real annual return is closer to 8%.
That beats 90-day T-bills at 4.75%, tax-free municipal bonds (MUB) at 2.20%, US Treasury bonds (TLT) at 3.70%, S&P 500 (SPY) equities with dividends at 2.2%, and junk (HYG) bonds at 6.0%.
Unless you have a new Internet start-up percolating in your garage, it is going to be very hard to beat your own home’s net return.
5) The Last Leverage Left
A typical down payment on a new home these days is 25%. That gives you leverage of 4:1. So, in a market that is rising by 5.0% a year, your increase in home equity is really 20% a year.
Pay a higher interest rate, and down payments as low as 10% are possible, bringing your annual increase in home equity to an eye-popping 50%.
And if you qualify for an FHA loan up to $633,000, only a 3.5% deposit is required.
There are very few traders who can make this kind of return, even during the most spectacular runaway bull market. And to earn this money in your house, all you have to do is sleep in it at night.
6) The Tax Breaks are Great
The mortgage interest on loans up to $750,000 million is deductible on your Form 1040, Schedule “A” with a $10,000 limitation.
You can duck the capital gains entirely if the profit is less than $500,000, you’re married and lived in the house for two years or more.
Any gains above that are taxed at only a maximum 20% rate. These are the best tax breaks you can get anywhere without being a member of the 1%. Profits can also be deducted on the sale of a house if you buy another one at the equivalent value within 18 months.
7) Job Growth is Good and Getting Better
The monthly Non-Farm Payroll reports are averaging out at about 150,000 a month. As long as we maintain this level or higher, enough entry-level homeowners are entering the market to keep prices rising.
And you know those much-maligned millennials? They are finally starting to have kids, need larger residences, and are turning from renting to buying.
8) There is No Overbuilding Anywhere
You know those forests of cranes that blighted the landscape in 2006? They are nowhere to be seen.
The other signs of excess speculation, liars’ loans, artificially high appraisals, and rapid flipping no longer exist. Much of this is now illegal, thanks to new regulations.
No bubble means no crash. Prices should just continue grinding upwards in a very boring, non-volatile way.
9) Foreign Capital is Pouring In
The problem has become so endemic that the US Treasury is demanding proof of beneficial ownership on sales over $2 million to get behind shell companies and frustrate money laundering and tax evasion.
Remember, they are fleeing negative rates at home.
US real estate has become the world’s largest high-yield asset class.
So, the outlook is a petty rose for individual homeownership in the foreseeable future.
Just don’t forget to sell by 2030.
That is when the next round of trouble begins.
For Sale
https://www.madhedgefundtrader.com/wp-content/uploads/2016/11/Johns-House.jpg356473MHFTFhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTF2024-09-20 09:02:022024-09-20 10:23:43This Will Be Your Best Performing Asset for the Next 30 Years
After spending better than a half-century in the investment business, I see all decisions boiling down to a single issue: Artificial Intelligence.
Speaking to people at the local PTA, American Legion, the VFW, the Commonwealth Club, people sitting next to me at high school football games, and even my own readers, this is the impression I get.
AI is rapidly working its way into every aspect of our lives. But then I live in Silicon Valley where everyone works in tech or in supporting service industries.
Companies that lead with AI, such as NVIDIA (NVDA), Google (GOOG), Amazon (AMZN), Facebook (FB), and Microsoft (MSFT) will prosper mightily. Those that don’t will disappear.
Technology companies now comprise an amazing 30% of U.S. stock market capitalization and 50% of corporate profits. They are on their way to 100% on both counts. Other industries may see the occasional brief, frenetic stock market rallies, which will quickly fade away.
Investing now is really ALL about technology with the exception of biotech and health care, which you really can consider “soft” technology.
So, I thought it timely to catch up with my old friend, Dr. Ray Kurzweil, head of engineering at Google (GOOG), the co-founder of the Singularity University, and an early AI evangelist.
Some 25 years ago, Kurzweil pitched Google co-founder Larry Page for a venture capital investment in an AI start-up. Larry responded by buying the entire company, even though it was only two weeks old. That brought Kurzweil in-house and gave him the first call on Google’s prodigious resources.
To understand the recent spate of AI breakthroughs you have to go back years ago and see how a computer beat a human in the traditional Chinese game of Go. Long a goal of AI developers, Go is the most complex game ever played by humans, with 324 squares (18 X 18) and 361 stones. That means there are 2.08 X 10 to the 170th power possible moves or more than double the number of electrons in the universe.
Scientists downloaded all known online Go moves in history, of which there were about 1 million. They then programmed a superfast mainframe to simulate 1 billion more Go moves. After that, beating all humans was a piece of cake.
You can apply this approach to more than just games. Google’s Waymo autonomous driving division let cars drive themselves 8 million miles and then simulated another 1 billion miles. That’s why they are so far ahead in the field. 1,000 robotaxis in San Francisco agree with this.
You can also employ the same strategy when asking computers to identify new drugs by running simulations against a decoded human genome. The possibilities boggle the mind.
And the stock market? How about the accuracy of the Mad Hedge Market Timing Index, which takes market data from the last 400 years and then simulates another 1,000 years on top of that? And you wonder why it’s always right, and why I’m up 60% this year.
The fruits of those labors are found today in many Google services, such as Google Assistant and Google Home, which are growing smarter by the day. “Semantic Search” is the order of the day whereby searches are made on the basis of meaning and context, instead of my keywords alone. I work with Google all day long and the progression has been nothing less than astounding.
Just around the corner are “Smart Replies.” Google will be able to read 120,000 books, or 600 million sentences, in ½ second, and come up with the best three possible answers to every question of yours. If you’re willing to wait a few minutes, you can get the best three answers from every book ever written.
The term “AI” was coined at a famed conference at Dartmouth College in 1956. Don’t be intimidated. AI is simply super fast pattern recognition that any off-the-shelf Excel spreadsheet can accomplish done on ever-faster supercomputers.
Kurzweil believes computers will pass the Turing Test by 2029 when their answers to any questions will be indistinguishable from humans. Miniaturization is another exponential trend that will place human intelligence on any smartphone by the 2030s.
Create a bionic link between your smartphone and your brain and the “singularity” is here, which Kurzweil believes will take place by the 2040s.
Kurzweil is a firm believer in the “Law of Accelerating Returns,” whereby the productivity of technology doubles every year. Costs drop by a similar amount, creating a radical deflation. So am I.
He argues that modern economic theories are broken, and I have argued this myself in the past. So much of technology’s output is free, and therefore immeasurable, that true GDP growth has been wildly underestimated.
And you wonder why inflation has been near zero for a decade, while the value of your home has doubled, and the efficiency of your cell phone has improved by a trillion-fold for a lower real price. Kurzweil expects 5 billion cell phones to be in circulation by 2025.
Moore’s law, where semiconductor price/performance doubled every year, reached its theoretical limits in 2016. All of the growth in processing power since then has been due to “3D Stacking,” where layers of processors are piled one on top of the other. The current generation of processors will see a once unimaginable 96 layers.
And if you think this is all very interesting, wait a few years until we get economic quantum computers, which will increase computing power by a trillion-fold at no cost. Quantum computers rely on the infinite number of directions electrons can spin, rather than the simple on-or-off gates of traditional legacy computers. To learn more about quantum computing, please read my last piece on the subject by clicking here.
Sometime in 2019, Kurzweil will publish a sequel to his last book called “The Singularity is Nearer.” It will no doubt be the AI blockbuster of the year.
Before then he is launching into fiction for the first time, publishing “Danielle”, which is about a girl who solves all the problems of the world by the age of 22 with the tools we have available to us today. To learn more about this project and to pre-order the book, please visit www.danielleworld.com .
Go is a Piece of Cake if You can Simulate a Billion Moves
https://www.madhedgefundtrader.com/wp-content/uploads/2018/09/Game-image-2-e1537288013322.jpg303400MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2024-09-05 09:02:402024-09-05 10:31:51Coffee With Ray Kurzweil
Once a certain investment theme takes hold, the imitators start coming out of the woodwork in droves.
In 1989, all of the largest Japanese banks stampeded issuing naked short put options on the Nikkei Average by the billions of dollars when the index was at an all-time high. The Nikkei then fell by 85% causing tens of billions worth of losses.
I remember signing the paperwork on a $3 billion deal for the Industrial Bank of Japan on behalf of Morgan Stanley. It’s been 35 years, and I’m still waiting for those investors to come after me.
Then there was the peak of the Dotcom Bubble in 2000 and no less than five online pet food delivery companies raised billions. (remember Webvan and those cute sock puppets?) Every one of them went under.
So, what has been one of the biggest fads of 2024?
That would be electric vehicles.
You no longer have to wear Birkenstocks, grow your hair long, and smoke pot to drive an electric car. They have become a major part of the American economy. According to Adam Jonas at Morgan Stanley, EVs account for 8% of the total car market today and will grow to 10% by 2025 and 25% by 2030.
I have been involved with Tesla (TSLA) since its earliest days way back in 2003. Then it was one rich man’s hobby, with technology that was a reach at best, and unlikely to ever see the light of day as a public company. There it remained for seven years.
Then Tesla brought out the Model S in 2010, which I snapped up as fast as I could, picking up chassis no. 125 at the Fremont factory. My signature is still on the wall there as are those for all of the first 125 buyers. Every time I pick up a new Tesla I check if it is still there.
If the Model S worked it had the potential to be a real car. If it didn’t, I would wind up with $100,000 worth of inert aluminum, steel, silicon, rubber, lithium, and copper with only scrap metal value.
The trials were then only just beginning for Musk. He faced nervous breakdowns, sleeping in factories, and SEC prosecutions. After a decade of abuse, suddenly everything clicked. Total Tesla production is now running at a 1.7 million vehicle annual rate. The shares leaped 180-fold to a split-adjusted $425 from their post-IPO low of $2.40. That move financed a lot of retirements among my readers.
I remember what Steve Jobs once told me; “Like many overnight successes, this one took decades to pull off.”
Suddenly, making electric cars looked easy. Raising money to finance them looked even easier.
The problem is that all the new EV entrants now have a hyper-aggressive Tesla to compete against. Tesla has already locked up long-term supplies of crucial commodities essential for EV production, like copper, lithium, and chromium for stainless steel.
It has a 66% market share. It was a lock on experienced EV engineering talent. It has a near monopoly with a 48,000-strong national charging network which Ford (F) had no choice but to sign up for.
The best competitors can hope for is to peel off experienced employees from Tesla at inflated salaries, and then get sued by Tesla.
Enter the hoards, which I list below, a roll call of the shameless:
Nikola Badger (NKLA) – Has a hydrogen fuel cell power source that hasn’t a hope in hell of ever becoming economic. As I never tire of explaining to investors, while electric power is digital and infinitely scalable, hydrogen is analog and isn’t. Maybe that’s why the stock has been a disaster. Too many unbelievable promises and no actual functioning model. Gravity was their only actual power source. It just announced a recall of its electric trucks because of a coolant leak in the battery that caused fires.
Fisker (F-SRNQ) – If at first, you don’t succeed, why not fail again? This VEHICLE had double the number of parts of a conventional international combustion engine. Its chief claim to fame was that it got a free factory from the government in Joe Biden’s home state and the fact that Justin Bieber drove one. More flailing at the wind. It recently went bankrupt….again.
Aspark Owl – A $3.2 niche supercar with an appeal to maybe three car-collecting Saudi princes.
Bollinger B1 – Is a $125,000 SUV expected from a Michigan startup with only a 200-mile range. Why not pay nearly double the cost of a Tesla Model X and get half the performance?
The Byton M-Byte – Is a $45,000 crossover car from a Chinese start-up. China has actually been building electric cars longer than Tesla, but they have a tendency to break down or catch on fire. Quality and safety problems have until now kept them out of the US, and probably always will.
Genesis Essentia – A Croatian-based start-up with a major investment from South Korea’s Hyundai. It will most likely never get off the drawing board. The last time Croatia built cars was for the Austria-Hungarian Empire during WWI.
Rivian R1T(RIVN) – A start-up with a reasonably priced truck and up to 400 miles of range that will only make it because they have a 100,000-unit order from the largest shareholder, Amazon (AMZN). It’s perfect for local deliveries. The cars are beautiful and there is a two-year waiting list for the $80,000 list price vehicles. (RIVN) is the only alternative EV maker that will probably make it.
By now, virtually every major car manufacturer has or is about to roll out its entry in the electric car race. I list them below, skipping those that are more than two years out over the horizon. Notice the profusion of the letter “e” in the names. In fact, there are an astonishing 527 EVs either on, or about to hit the market.
They include the Porsche Taycan, Audi eTron, Jaguar I-Pace, Austin Mini Electric, Fiat 500e, Kia Niro EV, BMW i3, Chevy Bolt EV, Hyundai Kona Electric, and the Hyundai Ioniq Electric, Ford F-150 Electric, Ford Mustang Mach-E, and Nissan Ariya.
Not one of these comes even close to the price/performance and battery density of the Tesla cars. Tesla is a decade ahead of the competition and is accelerating its lead. At best, they will sell a few electric cars to those who are intensely loyal to their brands and lose money doing it.
In the meantime, Tesla hasn’t been sitting on its hands. Elon Musk plans to bring out a $25,000 model in two years that will bar entry to the field from any other competitor. It has its own $250,000 supercar, the Tesla Plaid, which will go zero to 60 MPH in 1.9 seconds and has a 600-mile range. The Tesla Cyber Truck at $60,000 has the specs to take on the enormous US pickup market. Did I mention that the company is on the verge of developing technology that will improve battery performance by a staggering 20-fold?
So Tesla is branching out to suck up every profit in every branch of the entire global auto industry.
And this is what most traders, especially the short sellers, got wrong about Tesla. The data is worth more than the car. The miles driven provide a springboard from which the company can offer very high value-added and profitable services, like autonomous driving. Not even Alphabet (GOOGL) can replicate this.
When I bought my first Tesla more than a decade ago, I knew I was betting on the company. The big risk was that General Motors (GM) would step in with their own cheap electric car and drive Tesla out of business.
In the end (GM) did that, but too little, too late. Its Chevy Bolt EV didn’t hit the market until the end of 2016. Today it offers a boring design, lacks autonomous driving, possesses only a 259-mile range for $36,620, and is subject to recall, thanks to recurring battery fires (click here for the link).
The quality is, well, Chevy quality. The company has already announced it will discontinue production.
Tesla is approaching 2 million. It’s too late to close the barn door after the horse has “bolted,” as GM is earning. Over the past decade, Tesla shares were up 180 times at the high. GM shares are nearly unchanged during the greatest bull market of all time.
It is competing against Teslas that are 20 years from the future, are fully autonomous, go to street-autonomous driving next year, and upgrade itself once or twice a month.
Make mine Tesla, please, which will soon become the world’s first trillion-dollar car company. Don’t waste your time or money on the others, either as a driver or investor.
I’ll Go with Tesla
https://www.madhedgefundtrader.com/wp-content/uploads/2018/10/New-Tesla.png455647Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2024-08-27 09:02:542024-08-27 10:14:59Why You Must Avoid All EV Plays Except Tesla
Since we have just taken in a large number of new subscribers from around the world, I will go through the basics of my Mad Hedge AI Market Timing Index one more time.
I have tried to make this as easy to use as possible, even devoid of the thought process.
When the index is reading 20 or below, you only consider “BUY” ideas. When it reads over 80, it’s time to “SELL.” Everything in between is a varying shade of grey. Most of the time, the index fluctuates between 20-80, which means there is absolutely nothing to do.
To identify a coming market reversal, it’s good to see the index chop around for at least a few weeks at an extreme reading. Look at the three-year chart of the Mad Hedge Market Timing Index.
After three years of battle testing, the algorithm has earned its stripes. I started posting it at the top of every newsletter and Trade Alert several years ago and will continue to do so in the future.
Once I implemented my proprietary Mad Hedge Market Timing Index in October 2016, the average annualized performance of my Trade Alert service soared to an eye-popping 44.54%.
As a result, new subscribers have been beating down the doors trying to get in.
Let me list the high points of having a friendly algorithm looking over your shoulder on every trade.
*Algorithms have become so dominant in the market, accounting for up to 90% of total trading volume, that you should never trade without one
*It does the work of a seasoned 100-man research department in seconds
*It runs in real-time and optimizes returns with the addition of every new data point far faster than any human can. Image a trading strategy that upgrades itself 30 times a day!
*It is artificial intelligence-driven and self-learning.
*Don’t go to a gunfight with a knife. If you are trading against algos alone, you WILL lose!
*Algorithms provide you with a defined systematic trading discipline that will enhance your profits.
And here’s the amazing thing. My Mad Hedge Market Timing Index correctly predicted the outcome of the presidential election, while I got it dead wrong.
You saw this in stocks like US Steel, which took off like a scalded chimp the week before the election.
When my and the Market Timing Index’s views sharply diverge, I go into cash rather than bet against it.
Since then, my Trade Alert performance has been on an absolute tear. In 2017, we earned an eye-popping 57.39%. In 2018, I clocked 23.67% while the Dow Average was down 8%, a beat of 31%. So far in 2024, we are up 20%.
Here are just a handful of some of the elements that the Mad Hedge Market Timing Index analyzes in real-time, 24/7.
50 and 200-day moving averages across all markets and industries
The Volatility Index (VIX)
The junk bond (JNK)/US Treasury bond spread (TLT)
Stocks hitting 52-day highs versus 52-day lows
McClellan Volume Summation Index
20-day stock bond performance spread
5-day put/call ratio
Stocks with rising versus falling volume
Relative Strength Indicator
12-month US GDP Trend
Case Shiller S&P 500 National Home Price Index
Of course, the Trade Alert service is not entirely algorithm-driven. It is just one tool to use among many others.
Yes, 50 years of experience trading the markets is still worth quite a lot.
I plan to constantly revise and upgrade the algorithm that drives the Mad Hedge Market Timing Index continuously as new data sets become available.
It Seems I’m Not the Only One Using Algorithms
https://www.madhedgefundtrader.com/wp-content/uploads/2019/07/algorithm.png768575Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2024-07-02 09:02:242024-07-02 10:11:09How the Mad Hedge Market Timing Algorithm Works
I have been watching with some amusement the trading of the Trump Media & Technology Group (DJT).
After the IPO was issued in 2023, it soared to $130, then collapsed to $15. It has just completed another round trip, plunging 50% over the last month. This is for a company that posted a horrific $58 million loss in 2023. In no way can that support a $5 billion market cap at the current $22 share price unless it’s the next AI stock we don’t know about. (DJT) has become the latest meme stock.
So many hedge funds have lined up to sell that the borrowing costs have skyrocketed to an incredible 550%. (DJT) has become the latest meme stock. The former president owns 60% of the shares. Accusations of insider trading and fraud are rife. If the former president loses the election, goes to jail, or dies as a result of his unhealthy lifestyle (he’s 50 pounds overweight) the shares become worthless. In other words, it’s a stock that no professional investor would touch with a ten-foot pole.
Every investment bubble creates its special instruments of self-destruction and this one is no different.
There were highly touted leveraged commodity and gold funds during the seventies, portfolio insurance during the eighties, money-losing tech companies with lots of “eyeballs” in the nineties, and subprime lending in the 2000s.
In this cycle, we have the Special Purpose Acquisition Companies, otherwise known as “SPACs.”
The goal of a SPAC is to raise money first on some generalized investment theme, and then merge with a target company to achieve those goals. This allows companies to go public while skipping most disclosure requirements.
SPACs have their advantages for some people. It enables start-up companies with no track record or earnings to go public faster without the costs and regulatory scrutiny of the burdensome public IPO process. Promoters promise to get investors into the next Amazon (AMZN) or Facebook FB) early.
Easier said than done.
Some $162 billion was raised for SPACs in 2021 followed by a much more modest $15 billion in 2022 and $125 million in 2023. The largest has been hedge fund manager Bill Ackman’s Pershing Square Tontine Holdings Ltd. (PSTH) at $4 billion. There is even a SPAC for SPACs, the Defiance Gen SPAC Derived ETF (SPAK).
The performance of SPACs so far has been dismal. There have been 915 SPACs created since 2015. Only 93 managed to invest their funds in a target company and only 29 of those have produced a profit. This was during one of the greatest runaway bull markets of all time.
You would have done better to simply buy the cheapest Vanguard index funds or 90-day T-bills. In the meantime, the issuers of SPACs for the most part became wealthy.
The quality of the management who had stepped forward to run SPACs has been mixed at best, including Ackman himself, who recently ran two gargantuan money-losing years back to back. They include former House Speaker Paul Ryan and NBA Hall of Famer Shaquille O’Neil, not exactly known as financial wizards.
Then there’s Nikola (NKLA), an electric/hydrogen vehicle company that has promised to take on Elon Musk, unfazed by the complete lack of a functioning vehicle. These shares have cratered by 92% since their market peak among multiple fraud allegations aimed at the founder.
The risks and limitations of SPACs are legion. You are essentially betting on the good faith and judgment of a single individual unmoored by any filings with the SEC. There are no guarantees they can achieve anything. These disclosures to the government are there to protect you. Without them, you are swimming without a swimsuit.
The conflicts of interest are enormous. SPAC issuers get to buy the equivalent of call options on their funds at deep discounts prior to the issue. When issuers make fortunes overnight with little money upfront, you want to run a mile.
And here is the big problem with SPACs. They are essentially roach motel investments, easy to check in but impossible to check out. Liquidity going in is unlimited but coming out is nil. You can often only redeem your investment at a huge discount, or if another buyer is willing to take out at any price. That makes marks to market challenging at best.
Investors that buy SPACs are giving up all the protections of SEC protections for much higher risks and lower returns.
Suffice it to say that if PT Barnum were working in the financial markets, he’d be up to his eyeballs with SPAC offerings.
Personally, I’ll give them a pass. You should too.
The Problem is that it’s a Dummy
https://www.madhedgefundtrader.com/wp-content/uploads/2020/10/dummy.png366550Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2024-04-23 09:02:542024-04-23 10:40:14Why most SPACs are a Scam
You’ve spent vast amounts of time, money, and effort to become options trading experts. You know the difference between bids and offers, puts and calls, exercise prices, and expiration days.
And you still can’t make any money.
Now what?
Where do you apply your newfound expertise? How do you maximize your reward versus your risk?
It is all very simple. Stick to five simple disciplines that I am about to teach you and you will suddenly find that the number of your new trades that are winners takes a quantum leap, and the money will start pouring into your trading account.
It’s really not all that hard to do. So here we go! 1) Know the Macro Picture
If you have a handle on whether the economy is growing or shrinking, you have a major advantage in the options market.
In a growing economy, you only want to employ bullish strategies, such as calls, call spreads, and short volatility plays.
In a shrinking economy, you want to execute bearish plays, such as puts, put spreads, and long volatility plays.
Remember the only thing that is useful is a view on what the economy is going to do NEXT. The government only publishes historical economic data, which is for the most part useless in predicting what is going to happen in the future.
Remember, the options market is all about discounting what is going to happen next.
And how do you find that out? Well, you could hire your own in-house staff economist. Or you could rely on economic research from the largest brokerage houses that all have their own economist.
Even the Federal Reserve puts out its own forecasts for economic growth prospects. However, all of these sources have notoriously poor track records. Listening to them and placing bets on their advice CAN get you into a world of trouble.
For the best possible read on the future of the U.S. and the global economy, there is no better place to go than Global Trading Dispatch, published by me, John Thomas, the Mad Hedge Fund Trader.
This is where the largest hedge funds, brokers, and yes, even the U.S. government go to find out what really is going to happen to the economy.
2) Looking for Great Industry Fundamentals
Do you want to give yourself another edge?
There are more than 100 different industries listed on the U.S. stock markets. However, only about five or 10 are really growing decisively at any particular time. The rest are either going nowhere or are shrinking.
In fact, you can find a handful of sectors that are booming while others are in outright recession.
If you are a major hedge fund, institution, or government, you may want to cover all 100 of those industries. Good luck with that.
If you are a small hedge fund, or an individual working from home, you will want to conserve your time and resources, skip most of the U.S.industry, and only focus on a handful.
Some traders take this a step further and only concentrate on a single high-growing, volatile industry, such as technology or biotech, or a single name, such as Netflix (NFLX), Tesla (TSLA), or Amazon (AMZN).
How do you decide which industry to trade?
Brokerage houses pump out more free research than you could ever read in a lifetime. Government reports tend to be stodgy, boring, and out of date. Big hedge funds keep their in-house research confidential (although some of it leaks out to me).
The Mad Hedge Fund Trader solves this problem for you by limiting its scope to a small number of benchmark, pathfinder industries, such as technology, banks, energy, consumer cyclicals, biotech, and cybersecurity.
In this way, we gain a handle on what is happening in the economy as a whole, while lining up rifle shots on the best options trades out there.
We want to direct you where the action is, and where we have a good handle on future earnings prospects.
It doesn’t hurt that we live on the edge of Silicon Valley and get invited to test out many technologies before they are made public.
3) The Micro Picture is Ideal
Once you have a handle on the economy and the best industries, it’s time to zero in on the best company to trade in, or the “MICRO” selection.
It’s always great to find a good target to trade in because positions in single companies deliver double or triple the returns compared to stock indexes.
That’s because the market will pay a far higher implied volatility for a single company than a large basket of companies.
Remember also that you are taking greater risks in trading individual companies. One single stock is subject to far greater even risk and a basket.
If the earnings come through as expected, everything is hunky-dory. If they don’t, the shares can drop by half in a heartbeat. Large indexes buffer this effect.
Of course, there are gobs of market research out there from brokers about individual companies. Some of it is right, some of it is wrong, but all of it is conflicted. Recommendations are either “BUY” or “HOLD.”
Brokers are loath to issue a “SELL” recommendation for a stock because it will eliminate any chance of that firm obtaining new issue business. Who wants to hire a broker to sell new stock with a “SELL” recommendation on their stock?
And brokerage firms don’t make their bread and butter on those piddling little discount commissions you have been paying them. They make it on new issues business. In fact, a new issue can earn as much as $100 million from a new issue for one firm.
I have been following about 100 companies in the leading market sectors for nearly half a century. Some of the managements of these firms have become close friends over the decades. So, I get some really first-class information.
When markets rotate to sectors and companies that I already know, I have a huge advantage. Needless to say, this gives me a massive head start when selecting individual names for options Trade Alerts.
4) The Technicals Line Up
I have never been a huge fan of technical analysis.
Most technical advice boils down to “If it’s gone up, it will go up more” or “If it’s gone down, it will go down more.”
Over time, the recommendations are accurate 50% of the time or are about equal to a coin toss.
However, the shorter the time frame, the more useful technical analysis becomes. If you analyze intraday trading, almost all very short-term movements can be explained in technical terms. This is entirely how day traders make their livings.
It’s a classic case of if enough people believe something, it becomes true, no matter how dubious the underlying facts may be.
So, it does behoove us to pay some attention to the charts when executing our trades.
Talk to old-time investors and you will find that they use fundamentals for long-term stock selection and technicals for short-term order execution.
Talk to them some more and you find the best fundamentalists sound like technicians, while savvy technicians refer to underlying fundamentals.
Get the technicals right, and you can provide one additional reason for your trade to work.
5) The calendar is favorable There is one more means of assuring your trades turn into winners.
According to the data in the Stock Trader’s Almanac, $10,000 invested at the beginning of May and sold at the end of October every year since 1950 would be showing a loss today.
Amazingly, $10,000 invested on every November 1 and sold at the end of April would today be worth $702,000, giving you a compound annual return of 7.10%.
Of the 62 years under study, the market was down in 25 May-October periods, but negative in only 13 of the November-April periods, and down only three times in the past 20 years!
There have been just three times when the "good six months" have lost more than 10% (1969, 1973 and 2008), but with the "bad six months" time period there have been 11 losing efforts of 10% or more.
Yes, it may be disturbing to learn that we ardent stock market practitioners might in fact be the high priests of a strange set of beliefs. But hey, some people will do anything to outperform the market.
It is important to remember that this cyclicality is not 100% accurate, and you know the one time you bet the ranch, it won’t work.
So, there we have it.
Adopt these five simple disciplines and you will find your success rate on trades jumps from a coin toss to 70%, 80%, or even 90%.
In other words, you convert your trading from an endless series of frustrations to a reliable source of income.
If a potential trade meets only four of these five criteria, please do it with your money and not mine. Your chances of making money have just declined.
And I bet a lot of you poor souls execute trades all the time that meet NONE of these criteria.
Get the tailwinds of the economy, your industrial call, your company picks, the technicals, and the calendar working for you, and all of a sudden you’re a trading genius.
It only took me half a century to pull all this together. Hopefully, you can learn a little bit faster than that.
I hope it all works for you.
This is John Thomas signing off saying good luck and good trading.
https://www.madhedgefundtrader.com/wp-content/uploads/2018/08/John-Thomas-image-e1535492954635.jpg388350MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2024-03-28 09:02:432024-03-28 10:54:52How to Reliably Pick a Winning Options Trade
Malls are dying. Commerce is moving online at a breakneck pace. Investing in retail is a death wish.
No less a figure than Bill Gates, Sr. told me before he died that in a decade, malls would only be inhabited by climbing walls and paintball courses, and that was a decade ago.
Except it didn’t quite work out that way. Lesser quality malls are playing out Mr. Gates’ dire forecast. But others are booming. It turns out that there are malls, and then there are malls.
Let me expand a bit on my thesis.
We are just entering a decade-long decline in interest rates, probably starting in June. Malls are highly leveraged entities that often are financed by Real Estate Investment Trusts) REITS. That makes some mall-based REITS some of the most attractive investments in the market.
Technology is moving forward at an exponential rate. As a result, product performances are improving dramatically, while costs are falling. Commodity and energy prices are also rising, they are but a tiny fraction of the cost of production.
In other words, DEFLATION IS HERE TO STAY!
The nearest hint of real inflation won’t arrive until the late 2020s, when Millennials become big spenders, driving up the cost of everything.
So, let's go back to the REIT thing. Real Estate Investment Trusts are a creation of the Internal Revenue Code, which gives preferential tax treatment for investment in malls and other income-generating properties.
There are 1,100 malls in the United States. Some 464 of these are rated as B+ or better and are concentrated in the biggest spending parts of the country (San Francisco, North New Jersey, Greenwich, CT, etc).
Trading and investing for a half-century, I have noticed that most managers are backward-looking, betting that existing trends will continue forever. As a result, their returns are mediocre at best and terrible at worst.
Truly brilliant managers make big bets on what is going to happen next. They are constantly on the lookout for trend reversals, new technologies, and epochal structural changes to our rapidly evolving modern economy.
I am one of those kinds of managers.
These are not your father’s malls. It turns out the best quality malls are booming, while second and third-tier ones are dying the slow painful death that Mr. Gates outlined.
It is all a reflection of the ongoing American concentration of wealth at the top. If you are selling to the top 1% of wealth owners in the country, business is great. If fact, if you cater even to the top 20%, things are pretty damn fine.
You can see this in the top income-producing tenants in the “class A” malls. In 2000, they comprised J.C. Penney. Sears, and Victoria’s Secret. Now Apple, L Brands, and Foot Locker are sought-after renters. Put an Apple store in a mall, and it is golden.
And what about that online thing?
After 25 years of online commerce, the business has become so cutthroat and competitive that profit margins have been beaten to death. You can bleed yourself white watching Google AdWords empty out your bank account. I know, because I’ve tried it.
Many online-only businesses are now losing money, desperately searching for that perfect algorithm that will bail them out, going head-to-head against the geniuses at Amazon.
I open my email account every morning and find hundreds of solicitations for everything from discount deals on 7 For All Mankind jeans, to the new hot day trading newsletter, to the latest male enhancement vitamins (although why they think I need the latter is beyond me).
Needless to say, it is tough to get noticed in such an environment.
It turns out that the most successful consumer products these days have a very attractive tactile and physical element to them. Look no further than Apple products, which are sleek, smooth, and have an almost sexual attraction to them.
I know Steve Jobs drove his team relentlessly to achieve exactly this effect. No surprise then that Apple is the most successful company in history and can pay astronomical rents for the most prime of prime retail spaces.
It turns out that “Clicks to Bricks” is becoming a dominant business strategy. A combination of the two is presently generating the highest returns on investment in retail today.
People start out by finding a product online and then going to the local mall to try it on, touch it, and feel it. Apple does this.
Research shows that two-thirds of Millennials prefer buying their clothes and shoes at malls. Once there, the probability of a serendipitous purchase is far greater than online, anywhere from 20% to 60% of the time.
This explains why pure online businesses by the hundreds are rushing to get a foothold in the highest-end malls.
Immediate contact with a physical customer gives retailers a big advantage, gaining them the market intelligence they need to stay ahead of the pack. In “fast fashion” retailers like H&M and Uniqlo, which turn over their inventories every two weeks, this is a really big deal.
There’s more to the story. Malls are not just shopping centers they have become entertainment destinations as well. With an ever-increasing share of the population chained to their computers all day, the demand for a full out-of-the-house shopping, dining, and entertainment family experience is rising.
Notice how Merry Go Rounds have started popping up at the best properties? Imax Theaters are spreading like wildfire. And yes, they have climbing walls too. I haven’t seen any paintball courses yet, but the guns and accessories are for sale.
And notice that theaters are now installing first-class adjustable heated seats and will serve you dinner while the movie is playing. (Warning: if you eat in the dark, you will end up wearing half of it home).
This is why all of the highest-rated malls in the country are effectively full. If you want space, there you have to wait in line. REIT managers pray for tenant bankruptcies so that can jack up rents on the next incoming client or pivot their strategy towards the newest retail niche.
Malls are also in the sweet spot in the alternative energy game. Lots of floor space means plenty of roof space. That means they can cash in on the 30% federal investment tax credit for solar roof installations. Some malls in sunny southwestern states are net power generators, effectively turning them into min local power utilities. By the way, the cost of solar has recently crashed.
Fortunately for us investors, we are spoiled for choice in the number of securities we can consider, most which can now be bought for bargain basement prices. Many have a return on investment of 9-11%, a portion of which is passed on to the end investor.
There are now 25 REITs in the S&P 500. The sector has become so important that the ratings firm is about to create a separate REIT subsector within the index.
According to NAREIT.com (click here for the link), these are some of the largest mall-related investment vehicles in the country.
Simon Growth Property (SPG) is the largest REIT in the country, with 241 million square feet in the US and Asia. It is a fully integrated real estate company that operates from five retail real estate platforms: regional malls, Premium Outlet Centers, The Mills, community/lifestyle centers, and international properties. It pays a 4.88% dividend.
Macerich Co. (MAC) is a California-based company that is the third largest REIT operator in the country. It has been growing through acquisitions for the past decade. It pays a 5.31% dividend.
Mind you, REITs are not exactly risk-free investments. To get the high returns you take on more risk. We remember how disastrously the sector did when the credit crunch hit during the 2009 financial crisis. Many went under, while others escaped by the skin of their teeth.
There are a few things that can go wrong with malls. Local economies can die, as it did in Detroit. Populations age, shifting them out of a big spending age group. And tax breaks can be here today and gone tomorrow.
These are all highly leveraged companies, so any prolonged rise in interest rates could be damaging. But as I pointed out below, there is little chance of that in the near future.
The bottom line here is that we are seeing anything but the death of the mall. It just depends on the mall.
All in all, if you are looking for income and yield, which everyone on the planet is currently pursuing, then picking up some REITs could be one of your best calls of the year.
See You At the Mall
https://www.madhedgefundtrader.com/wp-content/uploads/2016/04/Mall-e1461879279977.jpg303400MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2024-03-26 09:04:412024-03-26 12:20:27The Death of the Mall
Ignore the lessons of history, and the cost to your portfolio will be great. Especially if you are a bond trader!
Meet deflation, upfront and ugly.
If you look at a chart for data from the United States consumer prices are rising at an annual 3.2% rate. The long-term average is 3.0%.
This is above the Federal Reserve’s own 2.0% annual inflation target, with most of the recent gains coming from housing costs.
We are not just having a deflationary year or decade. We may be having a deflationary century.
If so, it will not be the first one.
The 19th century saw continuously falling prices as well. Read the financial history of the United States, and it is beset with continuous stock market crashes, economic crises, and liquidity shortages.
The union movement sprung largely from the need to put a break on falling wages created by perennial labor oversupply and sub-living wages.
Enjoy riding the New York subway? Workers paid 10 cents an hour built it 125 years ago. It couldn’t be constructed today, as other more modern cities have discovered. The cost would be wildly prohibitive. Look no further than the California Bullet Train, now expected to cost $100 billion. A second transbay tube in San Francisco will cost $29 billion.
The causes of the 19th-century price collapse were easy to discern. A technology boom sparked an industrial revolution that reduced the labor content of end products by ten to a hundredfold.
Instead of employing 100 women for a day to make 100 spools of thread, a single man operating a machine could do the job in an hour.
The dramatic productivity gains swept through the developing economies like a hurricane. The jump from steam to electric power during the last quarter of the century took manufacturing gains a quantum leap forward.
If any of this sounds familiar, it is because we are now seeing a repeat of the exact same impact of accelerating technology. Machines and software are replacing human workers faster than their ability to retrain for new professions. If you want to order a Big Mac at McDonald’s these days, you need a PhD in Computer Science from MIT. The new stores have no humans to take orders.
This is why there has been no net gain in middle-class wages for the past 40 years. That is until the pandemic hit which created labor shortages that are still working their way out. It is the cause of the structurally high U-6 “discouraged workers” employment rate, as well as the millions of millennials still living in their parent’s basements.
To the above add the huge advances now being made in healthcare, biotechnology, genetic engineering, DNA-based computing, and big data solutions to problems. Did anyone say “AI”?
If all the major diseases in the world were wiped out, a probability within 10 years, how many healthcare jobs would that destroy?
Probably tens of millions.
So the deflation that we have been suffering in recent years isn’t likely to end any time soon. In fact, it is just getting started.
Why am I interested in this issue? Of course, I always enjoy analyzing and predicting the far future, using the unfolding of the last half-century as my guide. Then I have to live long enough to see if I’m right.
I did nail the rise of eight-track tapes over six-track ones, the victory of VHS over Betamax, the ascendance of Microsoft (MSFT) operating systems over OS2, and then the conquest of Apple (AAPL) over Motorola. So, I have a pretty good track record on this front.
For bond traders especially, there are far-reaching consequences of a deflationary century. It means that there will be no bond market crash, as many are predicting, just a slow grind up in long-term bond prices instead.
Amazingly, the top in rates in this cycle only reaches the bottom of past cycles at 5.49% for ten-year Treasury bonds (TLT), (TBT).
The soonest that we could possibly see real wage rises will be when a generational demographic labor shortage kicks in during the late2020s.
I say this not as a casual observer, but as a trader who is constantly active in an entire range of debt instruments.
I just thought you’d like to know.
Hey, Have You Heard About John Deere?
https://www.madhedgefundtrader.com/wp-content/uploads/2019/07/john-thomas-08.jpg400400MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2024-03-20 09:02:142024-03-20 09:57:37Welcome to the Deflationary Century
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